In legal malpractice trial, another record in focus

Thursday

May 16, 2013 at 8:13 PM

Bank meeting's minutes appear to contradict Icard Merrill attorney Robert Messick and a bank officer; defense notes that the minutes are not signed

By JOSH SALMAN

In an apparent contradiction of previous testimony in a federal trial pitting the FDIC against the Icard Merrill law firm and one of its top attorneys, minutes of a First Priority Bank loan committee meeting contain no mention of an option contract that secured $5.3 million in debt.

That failure could be significant because former First Priority loan officer Steve Putnam said in sworn testimony earlier this week that the committee was told specifically the option contract did not exist.

Moreover, at least some bank documents seem to indicate the option contract on 25 acres -- a key to a proposed 97-home development in Manatee County known as River Meadows -- was part of the deliberation in making the loan to clients of Icard Merrill attorney Robert Messick, who represented the bank in preparing the loan documents, and also represented the borrower and a second lender that stood to benefit from the First Priority loan.

The loan committee minutes, entered into evidence Thursday, could swing momentum in the trial toward the Federal Deposit Insurance Corp., which is suing Messick and his firm for $4.6 million, alleging professional malpractice and breach of fiduciary duty.

They are also significant because the loan committee meeting represented the only time terms could have been changed between when a credit approval request was compiled and when Messick drafted a commitment letter on behalf of the bank.

The FDIC, the court-appointed receiver for the failed Bradenton bank, maintains that Messick failed to advise First Priority that an option contract that would have increased the project's value and lessened the bank's risk did not exist.

Like Putnam, Messick testified this week that he informed bank officials that documents showing the 25 acres as an option were in error.

Both said that knowledge should have been part of the loan committee's discussion. So it should have been noted in the minutes of their meeting.

Instead, there is no mention of the option contract at all in an unsigned draft that appears to be the only record of the meeting, according to the FDIC.

"Banks are required by law to retain meeting minutes, and every committee or board decision made should be documented in them," said Michael Duncan, an FDIC investigator. "Protection of those documents is hyper critical. It's the only way we know how the bank was run."

The FDIC, and an expert witness hired to testify on its behalf, say that Messick did not tell First Priority about the lack of an option on the 25 acres to avoid delays in closing the loan. A speedy closing would mean Messick clients Mark Brivik, the borrower, and U.S. Funding, the second lender, would receive First Priority money in a timely fashion.

The agency maintains that those ties made it impossible for Messick to provide good counsel to the bank and violated his duty to First Priority.

It also contends that without the 25-acre option as collateral, First Priority would never have loaned $5.3 million to Brivik, whose company defaulted on the note just 18 months later. The losses from the foreclosure were among $96 million absorbed by taxpayers when the embattled $240 million bank was ordered to close in August 2008, less than five years after it opened, records show.

"We had a pretty massive car wreck here," Duncan said.

But Dennis Waggoner, a Tampa attorney representing Messick and Icard Merrill, countered that the bank executives with the most knowledge of the Brivik loan have testified under oath that they verbally discussed the lack of the option and issued the loan anyway.

Waggoner also attempted to block the meeting's minutes from being entered into evidence, arguing they could not be trusted because they are unsigned.

"The paper does not speak," Waggoner said. "These aren't signed, and (the FDIC) has never seen a signed copy of these documents and has no real knowledge of what was actually said at that meeting. They have no personal knowledge because they were not there."

The unsigned minutes were the only record included in the official loan file. And while the bank's policy stated that minutes had to be signed, the FDIC presented evidence of a pattern of unsigned minutes.

"It was a frequent occurrence," Duncan said.

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